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A federal appeals court today threw out the Interior Department's
2007-2012 offshore oil and gas leasing program after finding that part
of the department's environmental analysis was inadequate.

The U.S. Circuit Court of Appeals for the District of Columbia decision (pdf), which sends the plan back to Interior for reconsideration, adds further uncertainty to offshore drilling policy at a time when Secretary Ken Salazar is reviewing where development should be allowed. The 2007-2012 plan was completed under President George W. Bush.

The court agreed with just one of several legal claims by environmentalists and native Alaskans who opposed expanded leasing in the Beaufort, Bering and Chukchi seas off Alaska's coast. The waters are home to polar bears, multiple whale species, seabirds and other animals. The case was brought by the Center for Biological Diversity, the Alaska Wilderness League, Pacific Environment, and the Native Village of Point Hope.

The panel found that Interior, when preparing the plan, botched its implementation of a requirement under the Outer Continental Shelf Lands Act that federal officials consider the "relative environmental sensitivity" of different OCS areas. It ordered a new evaluation.

The American Petroleum Institute, a major oil industry trade group, said it is reviewing the implications of the decision. "It would be a disservice to all Americans -- and a devastating blow to the economy -- if this decision were to delay further the development of vital oil and natural gas resources," the group said in a statement.

Sen. Mark Begich (D-Alaska), who supports oil development there, said the decision is unfortunate but blamed inadequate Bush-era planning. "The court's ruling today is a huge setback for Alaska and shows what happens when decisions are rushed," the freshman senator said in a statement. "The actions of the Bush administration have put Alaska's oil and gas industry at risk."

But an attorney for the Native Village of Point Hope -- where residents use the Chukchi Sea coast for subsistence hunting, whaling and other activities -- cast the decision as a broad repudiation of Bush-era leasing decisions. "It really emphasizes that the Bush administration was way out of line with its massive expansion in that leasing program. They rushed it through and did not do the right analysis," said attorney Peter Van Tuyn.

'All these questions have to be answered'

The next federal offshore lease sale, which would be for tracts in the western Gulf of Mexico, is scheduled for August. But it remains unclear how the decision and future decisions will affect offshore oil and gas leasing and development.

"It is very complex, and it has to be carefully reviewed before they can really say with certainty when the specific impacts are. Does it affect future leases, current leases ... all these questions have to be answered through an analysis of the decision's impact on the five-year plan," said Interior spokesman Frank Quimby.

Interior has held one Alaskan lease sale under the current plan -- Sale 193 in the Chukchi Sea last year -- and several other Alaskan sales are planned between 2010 and 2012.

In addition, the Bush administration proposed a major expansion of offshore leasing shortly before leaving office, issuing a draft five-year plan to replace the current program. The draft 2010-2015 plan includes leasing off the East and West coasts, which until last year had been covered by longstanding moratoria that have now lapsed, among other expansions.

Salazar is reviewing the plan and is holding several hearings across the country to gather input on offshore drilling policy. While he has suggested the Obama administration is open to some new leasing, he has also accused the Bush administration of acting too aggressively to widen development. Earlier this year, he described the draft proposal as a "headlong rush of the worst kind."

Van Tuyn said the court decision should help inform Salazar's review of where drilling should be allowed. "Salazar has already said he is going to look at this with fresh eyes, and this gives him a good template to do this with," he said.

Interior's study was too narrow, judges say

The decision turned on how Interior reviewed the ecological vulnerability of different areas when crafting the 2007-2012 plan.

Interior ranked the sensitivity of various OCS areas based on only the physical characteristics of those areas' shorelines, basing its rankings on a National Oceanic and Atmospheric Administration index that looked at sensitivity to oil spills, it states.

But the three-judge panel said this was an inadequate way to measure the relative sensitivity because the OCS extends far beyond shoreline areas. The OCS generally comprises federal waters between 3 and 200 miles from state shores. "Interior provides no explanation for how the environmental sensitivity of coastal shoreline areas can serve as a substitute for the environmental sensitivity of OCS areas, when the coastline and proposed leasing areas are so distant from each other," the decision states.

The opinion says these analyses are important because Interior, when making leasing decisions under the law, is supposed to strike a balance between potential environmental damage and potential oil and gas discovery. The court said Interior must conduct a more complete comparative analysis of the sensitivity of different OCS areas using a broader lens, and then reassess the timing and location of lease sales under the 2007-2012 plan.

The court sided with the environmentalists on just one of many issues they raised in the litigation. Other claims included allegations that the 2007-2012 plan violated both the Outer Continental Shelf Lands Act and the National Environmental Policy Act by failing to consider the effects of climate change on OCS regions and how the leasing plan would affect climate change.

The suit also claimed that Interior approved the plan without doing enough biological research about the Alaskan seas, and that it violated the Endangered Species Act by failing to adequately consult with the Fish and Wildlife Service or the National Marine Fisheries Service about potential harms before adopting the plan.

The judges said some of these claims were not yet ripe for review, while others lacked merit.

Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) said she was "troubled that the groups behind this litigation are engaging in the too-familiar tactic of suing on every possible issue, no matter the legal merits."